In the financial years 2014-15 and 2015-16, just over 1.48 million county court judgments were issued as default judgments because the defendant had failed to file a defence or to acknowledge the claim. The Ministry of Justice is investigating the number of default judgments made because the defendant did not receive the claim and whether any steps should be taken to reduce that number.
My Lords, I thank my noble and learned friend for his Answer and certainly hope for urgent action. Thousands of people every day have their credit records damaged by county court judgments without a chance to defend themselves and without even knowing anything about it, often by firms operating in NHS hospital car parks or utility companies. Will the Government consider asking courts to require proof that all reasonable efforts have been made to use correct addresses and ensure that any legal action is against the right person before issuing a judgment? Will the Minister also consider imposing penalties on those businesses which repeatedly fail to do so?
The rules regarding money claims in the county courts seeks to strike a balance between the rights of creditors quickly to claim and receive money that is owed to them and the right of defendants to be informed of a claim against them. Since the last Labour Government amended the rules in respect of these matters in 2008, the rules have required claimants to take reasonable steps to ascertain the defendant’s current address. Claimants must sign a statement of truth confirming that the details in their claim are true, and this includes the address of the defendant. Anyone deliberately providing false information to the court faces prosecution.
My Lords, the noble Baroness’s Question raises an issue about so-called enhanced court fees. Claim fees are 5% of the sum claimed up to a fee of £10,000, even on uncontested debts, whatever the prospects of recovery, so it is the creditor who takes the risk of insolvency. Does the Minister accept that these very high claim fees deter creditors from claiming genuine debts and encourage debtors to avoid payment?
In light of the fact that there have been 1.48 million county court default judgments in the past two years, it does not appear that claimants are being deterred by court fees, which have to be managed in order that the court estate can somehow remain solvent. At the end of the day, court fees are a recoverable element.
My Lords, I invite the Minister to consider another, equally important aspect of this matter: where no defence has been filed in a situation where a judge would otherwise have had ample scope either to dismiss the claim altogether or to rewrite the matter in a more equitable way, many people who are under severe financial strain are unable to have their side of things put in court. How can that circle be squared, if at all?
It can be squared by defendants entering an appearance into the court process and putting forward, in any appropriate manner, the defence that they have to the claim. In these circumstances, it would appear that the system works equitably. I point out again the need to balance the interests of claimants, many of which are small and medium-sized enterprises that suffer serious problems of cash flow due to debtors, and the interests of defendants.
My Lords, is the alarming picture reflected in the noble Baroness’s Question not another symptom of what is increasingly a failing civil justice system? Will the Government look at their support for Citizens Advice and other advice agencies as well as—building on the Minister’s last remarks—perhaps publicising the need for people to respond to any such claims and to seek advice where it is available?
It has to be made clear that resort to the court is the last step in the process of debt recovery, and that those responsible for debts are given notice of their indebtedness and are required to pay. It is only when they fail or refuse to respond to these entreaties that any application is made to the court. In these circumstances, defendants are given ample opportunity and notice to defend their interests.